You are running a profitable business. Your CPA is competent. You are maxing out whatever retirement account they set up for you. And every April, you write a check to the IRS that is larger than what most people earn in a year. You ask if there is anything more you can do. You are told you are already maxed out. You write the check.
What nobody has told you is that "maxed out" only applies to the vehicle you are currently in. There is a different vehicle entirely. It is called a Defined Benefit plan, and depending on your age, income, and business structure, it could legally shelter between $200,000 and $290,000 or more of your income from taxes every single year.
Not $20,000, or $72,000. Up to $290,000 sheltered from taxation in a single year, through a fully IRS-qualified retirement structure that has existed for decades. The reason you have not heard about it is not because it is obscure or aggressive. It is because it requires a specialist to design it - and most business owners have never been in the room with one.
I.Why your CPA may have never brought this up.
This is the first question almost every business owner asks. It is a fair question. The honest answer is that your CPA is not holding out on you. They are doing a different job.
Most CPAs are exceptional at tax compliance. They file accurately, hit every deadline, and make sure your estimated payments land correctly. What they are not is actuaries. Designing a Defined Benefit plan requires actuarial analysis to set contribution levels correctly, annual certification filed with the IRS, and coordination with a specialist who does this work every day. That is a different discipline entirely.
It is the same reason your CPA files your returns but sends you to a real estate attorney when you are closing a commercial deal. Good professionals know the edges of their lane.
That CPA is being honest and responsible. The problem is not the advice. The problem is that business owners hear "max out your 401(k)" and treat it as the final word, when really it is the answer to only one of the questions they should be asking.
II.How a Defined Benefit plan actually works.
A Defined Benefit plan is a qualified retirement plan, the same legal category as a 401(k), but the way it calculates your contribution is completely different. Instead of a fixed annual ceiling, the math works backward.
You specify a retirement benefit you want to receive at a future date. An actuary looks at your age, your income, and how many years you have left before that date. Then they calculate what the plan needs funded today to deliver that benefit on schedule. The older you are, the more aggressive the annual contribution has to be - because the compounding runway is shorter.
That reverse-engineering process is what makes DB plans so powerful for high-income business owners, and it is also why they cannot be set up on a spreadsheet. They require a licensed actuary who designs the plan, certifies the contribution levels annually, and files the required documentation with the IRS. This is a specialist instrument.
The three variables that determine your contribution.
- Your age. The older you are when the plan is established, the higher your required annual contribution - because there is less time for the plan to grow before retirement. A 55-year-old and a 45-year-old targeting the same benefit will have dramatically different annual contributions. The 55-year-old's number will be significantly higher - which means a significantly larger deduction.
- Your income. Specifically, the average of your three highest consecutive earning years. The IRS caps the compensation figure used in the calculation at $360,000 for 2026, but actual plan contributions can reach well above that ceiling depending on your age.
- Your target retirement benefit. The plan specifies the monthly income you want at retirement. The IRS allows a maximum annual benefit of $290,000 for 2026. The actuary works backward from whatever target you set.
III.What the numbers look like in practice.
The table below shows representative contribution ranges for business owners earning $400,000 or more. These are not your exact numbers - your specific contribution requires actuarial calculation - but they show the scale of what is available.
| Age | Approx. annual DB contribution | Est. tax savings* |
|---|---|---|
| 45 | $130,000 - $180,000 | $50K - $80K |
| 50 | $170,000 - $220,000 | $70K - $100K |
| 54 | $200,000 - $260,000 | $90K - $120K |
| 58 | $230,000 - $290,000+ | $100K - $135K+ |
| 62+ | $260,000 - $290,000+ | $120K - $165K+ |
*Illustrations based on combined federal and California marginal rates. Actual contributions require actuarial calculation.
IV.The December 31 deadline you cannot work around.
This is the most operationally important thing in this entire note. A Defined Benefit plan must be established before December 31 of the tax year in which you want the deduction. There is no retroactive option. You cannot set one up in February and apply it to the prior year. If the calendar flips before your plan is in place, that year's window is gone permanently.
If you are reading this with weeks left in the year, you still have time - but the process needs to start immediately. The plan document has to be drafted, reviewed, and formally adopted before midnight on December 31. That typically takes three to five weeks from the first consultation. Contributions themselves can follow after the year closes, which gives some breathing room on the cash side. But the plan has to exist before the year ends.
V.Who this works best for.
A DB plan is not the right call for every business owner. The structure requires a multi-year commitment to actuarially determined contributions. If your income has been highly variable, or your business is less than three years old, a DB plan is probably a conversation for the near future rather than right now. A redesigned SEP IRA or a Section 162 arrangement may make more immediate sense.
But if your net income has been consistently above $300,000 for at least three years, if you are between 42 and 65, and if you have a CPA who is open to coordinating with a specialist - you are almost certainly a strong candidate. The consultation will tell you exactly where you land.